How Fred Smith built FedEx from the ground up
The company founder built a global transportation giant. He died Saturday at age 80.
When he was a student at Yale in 1965, Fred Smith wrote an economics paper that spelled out his idea for a nationwide overnight delivery system. His professor gave him a C.
Smith didn’t give up. After serving as a Marine in Vietnam, he returned to Memphis, Tenn., to launch the business at the age of 26 with a handful of small planes. It was a simple concept: People would pay up “when it absolutely, positively has to be there overnight," which would become the Federal Express advertising slogan.
Over five decades, Smith built a global delivery giant with more than half a million employees, hundreds of jets crisscrossing the planet and annual revenue of around $90 billion. He died Saturday at the age of 80, the company said.
FedEx—and such rivals as United Parcel Service—now operate in a world that needs to move millions of daily e-commerce boxes to homes, moving well beyond the business of shuttling overnight envelopes between offices.
Smith steered the company for much of its history before stepping aside as chief executive officer in 2022. He stayed involved as executive chairman and as one of FedEx’s largest shareholders—a stake that made him a billionaire. One of his sons, Richard, is a top FedEx executive.
A vocal proponent of global trade and tax reform, Smith was no stranger to Washington. He was friends with prominent politicians including his Yale contemporaries George W. Bush and John Kerry.
He used his wealth to buy a stake in Washington’s NFL team. Smith sold his stake in 2021.
The CEO made a cameo as himself in the Tom Hanks film “Cast Away" about a FedEx employee stranded on an island. Hanks’s fictional character shared the real CEO’s obsession with details. Smith was known for popping over to the company’s Memphis air hub during spells of bad weather and rewarding employees who came to him with cost-saving ideas. The founder got personally involved with customer complaints, former employees recall.
“It’s been said many times that the only certainty in life is change. That’s been true in my life and the life of FedEx," Smith said during a speech at the Wings Club. “But that’s what makes the journey so exhilarating."
Frederick W. Smith was born in Marks, Miss., in 1944. His father helped build Greyhound’s bus system in the South and died when Fred was 4. His mother remarried and lived to age 93.
Smith first learned to fly at age 15. After graduating from Yale, Smith served two tours in Vietnam, where he was a platoon leader and forward air controller. He was awarded a Silver Star, Bronze Star and two Purple Hearts.
Smith returned after his service and soon began approaching investors with his overnight-delivery idea. A handful of venture capitalists put up $80 million—along with a few million dollars from his family—forming one of the largest venture-capital packages ever assembled at that time.
Federal Express kicked off service in April 1973 in Memphis, a hub chosen for its central location and weather. The first night of continuous operations, there were 186 packages. In 2023, FedEx delivered about 16.5 million shipments daily.
Early on, Smith had to ask for more money from investors and banks—one of his first pilots recalled putting about $100 in fuel on his credit card when FedEx was having trouble paying its bills. Smith covered part of his expenses in those early days using $27,000 he won playing blackjack.
In the 1970s, Smith admitted to his board of directors that he forged documents to obtain a bank loan that had required the approval of relatives, according to a book by Roger Frock, an early employee at FedEx who described the company’s start. Smith was indicted by a grand jury for allegedly forging documents and was acquitted at his trial after he showed supporting letters from his relatives.
By 1976, Federal Express had turned a profit. And in 1977, the deregulation of the airline industry allowed the company to carry more packages on bigger planes.
Fred Smith speaking in Washington, D.C., in 2012.
FedEx’s operating profits soared, in part because of Smith’s detailed control of the company. His success was attributed to several strategic decisions, including his use of a pioneering hub-and-spoke delivery system.
In the early days of running the company, Smith frowned on anything less than maximum effort. “If you brook mediocrity, eventually you will become mediocre," he once told The Wall Street Journal. “We make no apologies for that."
In addition, the company pioneered a number of technological innovations, and in 1994 became the first big transportation company to launch a website with tracking and tracing capabilities. At about the same time, Jeff Bezos launched Amazon.com in his garage.
By the late 1990s, as technology improved and email took off, the need for “FedExing" a document overnight diminished. FedEx acquired a company to give it a ground network in and later launched residential deliveries, a relatively late entry into the market.
FedEx tackled e-commerce deliveries next, lagging behind UPS in part because of Smith’s insistence of keeping express deliveries separate and of his company being properly compensated for its services.
Tensions with Amazon mounted as the retailer’s business exploded and Bezos built out his own warehouse and delivery operations, even leasing cargo planes. In 2019, Smith decided he didn’t want to deliver packages for a rival—and ended the contracts.
When he stepped down as CEO in 2022, Smith told employees that he timed the appointment of his successor, Raj Subramaniam, to the company’s 50th anniversary. In the same year, the company had faced pressure from an activist investor, D.E. Shaw, to streamline operations and cut costs.
When asked about his legacy, Smith replied, “I don’t think that way. I just enjoy what I’m doing. I’m very focused on the here and now. The legacy will be the success of the company and, I hope, the success of my children, of which I have a lot of."
Write to Esther Fung at esther.fung@wsj.com
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